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Delhi’s Azadpur Subzi Mandi is one of Asia’s biggest produce wholesale hubs, a massive distribution centre for fresh fruit and vegetables cultivated across India to be dispatched to consumers in all directions.

Each day, huge truckloads of produce arrive, are unloaded and then auctioned by traders to other middlemen, who repack the food in other trucks to be hauled away to far-flung places for eventual sale to consumers.

The fresh produce carried on these long journeys is rarely cooled or shaded, but rather subjected – especially in summers – to the blistering sun, creating high rates of spoilage.

The conditions at this major wholesale market, which has changed little in decades, reflect one of the biggest threats to food security in India, especially as the pace of urbanisation requires more food to be brought to cities.

With India’s farm-to-fork networks still dominated by politically influential traditional traders and small shops, the country has struggled to modernise its food supply chain and attract large-scale investment into cold-storage, refrigerated trucks and other modern logistics.

As a result, much of India’s agricultural output rots – or seriously degrades – before reaching consumers, even as hunger and malnutrition remain.

“The issues we have with food security are traceable to issues we have around supply chain bottlenecks, transport and storage,” says Sanjeevan Bajaj, chief executive of the Quality Forum of the Federation of Indian Chambers of Commerce and Industry.

According to estimates by the UN’s Food and Agriculture Organization (FAO), about 40 per cent of India’s fresh fruit and vegetables – worth an annual $8.3bn or so – perishes before reaching consumers. Each year, some 21m metric tonnes of wheat, especially grain – an amount almost equal to Australia’s total annual production – rots in India because of improper storage in the custody of the government-controlled Food Corporation of India.

But the magnitude of food losses in India dwarfs those in other countries, given the country’s size and the scale of its farm output, while the context in which this food goes to waste is also far more serious.

According to official figures, about half of Indian children under the age of five are chronically malnourished, resulting in stunted growth, while 20 per cent suffer from acute malnutrition, with visible wasting.

In recent years, Indian food prices have risen at double-digit levels, pinching the budgets of many working-class urban families in a country where food still accounts for an average of 31 per cent of monthly household expenditure.

India’s Congress-led government has acknowledged the importance of attracting more private investment to modernise the country’s food-supply chain to reduce wastage.

In 2012, Delhi decided to permit up to 51 per cent foreign direct investment in supermarkets and other modern food shops – which many say is the necessary front-end to make a modern food-supply chain work.

“If you can aggregate demand, you can aggregate supply, build scale and make sure investments in the middle pay off,” says Bijou Kurien, former president and chief executive of Reliance Retail, one of India’s largest modern retailers.

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Governments remain alert to the threat of food price volatility as unpredictable weather patterns have led to an increase in droughts, floods and hurricanes

Yet foreign retail giants remain wary of India, because of numerous conditions, including a requirement to source 30 per cent of their goods from small enterprises, and invest at least half their capital in back-end infrastructure. Many Indian states have also said they would bar foreign-owned stores, closing off large parts of the potential market.

The Hindu nationalist Bharatiya Janata Party, which is widely expected to lead a new government after the upcoming parliamentary elections, is firmly opposed to foreign investment in supermarkets.

Currently, just 3 per cent of India’s food and groceries are purchased through modern retail stores – including Indian owned – inhibiting investment in back-end logistics.

India has developed some modern supply chains linked to food processing companies, such as Nestlé, Unilever, Pepsi and Del Monte. But these still handle a fraction of the country’s perishable food.

According to a recent study by the Indian Institute of Management in Kolkata, cold storage facilities are available for just 10 per cent of India’s perishable produce – and are mostly used for potatoes – to meet India’s robust demand for chips. The study estimates that India needs storage facilities for another 370m metric tons of perishable produce.

But with so many obstacles confronting private groups – including a fragmented, tightly controlled market, and various government restrictions – such investments are unlikely to materialise rapidly.

“We have a modern system of food supply, but it is only addressing those who are at the higher level of income,” says Rosa Rolle, a senior agro-industry and post-harvest officer at the FAO’s regional office.

“The mass of people are dependent on traditional food systems for subsistence and livelihood. Policies have to be working on both systems in parallel.”